Momentum of truth

By Frank Buhagiar on Monday 15 May 2023

Momentum of truth
Image source: Momentum of truth
CommentaryFoodTech Investment

Food on the Move: FFF’s weekly roundup of listed FoodTech’s movers & shakers

No let up for FFF’s listed FoodTech space during the week ended 12 May 2023, at least in terms of the number of share price risers and fallers – 29 fallers, 17 risers and two non-movers to be exact.  For the record, the Nasdaq finished up on the week.  Can’t blame the index then.  What about the flurry of results that were due to be released?  A collective damp squib given the thumbs down by the market?

Rewind to last week’s Food on the Move. ‘Skipper the Penguin’ highlighted four companies that were due to report Q1 numbers – Olo (OLO), Farmers Edge (FDGE), Benson Hill (BHIL) and Hydrofarm (HYFM).  All four kept to their word and went ahead and published.  Question is, did all four find themselves among the 29 fallers?

Not at all. Of the four, only Hydrofarm’s share price ended the week down.  Three out of four - not bad going.  As for HYFM’s numbers: “Net sales decreased to $62.2 million compared to $111.4 million…Gross Profit decreased to $11.4 million compared to $16.6 million. Adjusted Gross Profit(1) was $14.1 million compared to $22.3 million…Net loss was $(16.8) million, or $(0.37) per diluted share, compared to net loss of $(23.3) million, or $(0.52) per diluted share” - enough there to knock the share price. Not all bad news though.  The controlled environment agriculture specialist did reaffirm its “Full Year 2023 Outlook…Net sales of approximately $290 million to $310 million.” But in the same breath went on to say it “…now expects results to be toward the lower end of the range.”  Market wasn’t impressed.  Shares closed off -18.75%.

Now compare HYFM’s results with the comment given by Olo founder and CEO Noah Glass: “During the first quarter, we generated $52.2 million in total revenue, a 22% increase year-over-year, as our platform saw continued momentum in average revenue per unit growth with increased module adoption within our existing customer base and new customers deploying with multi-modules. We’re proud of our results this quarter and believe the first quarter updates are indicative of the role Olo will continue to play in shaping the restaurant of the future for our customers and the strong business opportunity ahead as the industry continues on a path to 100% digital, or every transaction on- and off-premise being a digital transaction.”  The words “momentum” and “proud” say it all – shares closed up 6.3%.

Next up, Farmers Edge. Vibhore Arora CEO of the “pure-play digital agriculture company” had this to say: "Our continuous focus on cost savings contributed to an 18% reduction in the Adjusted EBITDA deficit this quarter on a year-over-year basis…We are actively engaging with our growers and enterprise customers to develop customized, industry-leading solutions that meet their unique needs and expect that our actions taken around revenue and acre growth will start to deliver results in the near term." Market liked what it heard – shares were marked up by 5.5%.

Finally, in the time-honoured fashion of saving the best till last, Benson Hill shares tacked on 20% following the release of its Q1 numbers.  Look no further than the three highlights in the accompanying press release: “Reported revenues increased 104 percent year-over-year to approximately $135 million, including an increase of 80 percent in proprietary revenues. Reported gross profit was $9.5 million ($4.3 million when excluding an approximate $5.2 million impact from open mark-to-market timing differences). The Company improved its 2023 guidance for Adjusted EBITDA and free cash flow.”

BHIL CEO Matt Crips added: "Our first quarter results represent a continuation of the momentum created in 2022. "We are confident this year can represent an inflection point for proprietary revenue growth and margin expansion as we lean into the capabilities of our closed-loop model and realize a greater anticipated contribution from partnership and licensing agreements."  There’s that word “momentum” again.  Maybe that’s the ticket.  A few more companies talking about momentum and hey presto the wider listed FoodTech space might just get on a positive roll of its own.  If only it was that easy…